Yarrow v Pettigrew

[2012] NZHC 1146

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

CIV 2011-443-315 [2012] NZHC 1146

IN THE MATTER OF     the Trustee Act 1956

BETWEEN  PAUL STEVEN YARROW Plaintiff

ANDCOLIN RITCHIE PETTIGREW First Defendant

ANDDUNCAN DOVICO (NZ) LTD Second Defendant

ANDDUNCAN DOVICO TRUSTEES LTD AND PAUL STEVEN YARROW AS TRUSTEES OF THE P S YARROW FAMILY TRUST NO. 5

Third Defendants

Hearing:         25 May 2012

Counsel:         D M Connor for Plaintiff

A R Gilchrist for First Defendant and First Named Third Defendant
No appearance by or on behalf of Second Defendant

Judgment:      25 May 2012

(ORAL) JUDGMENT OF HEATH J

Solicitors:

Mayne Wetherell, PO Box 3797, Shortland Street, Auckland

Dennis J Gates, PO Box 222, Whangaparaoa Kennedys, PO Box 3158, Shortland Street, Auckland Counsel:

D Connor, PO Box 3897, Shortland Street, Auckland

A Gilchrist, PO Box 5444, Wellesley Street, Auckland

YARROW V PETTIGREW HC NWP CIV 2011-443-315 [25 May 2012]

Introduction

[1]      Mr Pettigrew and Duncan Dovico Trustees Ltd (Duncan Dovico) apply for an order reviewing a decision made by Associate Judge Faire on 16 March 2012.  The Associate  Judge  granted  Mr  Yarrow’s  application  for  an  order  preventing  an Auckland barrister, Mr Brian Henry, from acting for Mr Pettigrew or the trustees of the P S Yarrow Family Trust No 5 (the Trust),in this proceeding.1

Background

[2]      The  present  proceeding  involves  an  alleged  misapplication  of  a  sum  of

$297,615.73  that  had  been  paid  into  a  trust  account  under  the  control  of

Mr Pettigrew and Duncan Dovico Trustees Ltd, on behalf of the Trust.

[3]      Mr Yarrow claims that Mr Pettigrew and Duncan Dovico paid those funds, without his consent, to third parties, Southern Cross Investments Ltd and Yarrow Bakers Ltd.  Mr Yarrow’s case is that Mr Pettigrew’s and Duncan Dovico’s actions amount to a breach of trust or knowing assistance to a breach of trust.

[4]      The trial issue is likely to be one of authority.  In defence, it is contended that the payment was made with Mr Yarrow’s consent.  That means that credibility issues will arise at trial and cross-examination of Mr Yarrow on the issue of consent will assume some significance.

Facts

[5]      Both  Mr  Yarrow  and  Mr  Henry  provided  affidavit  evidence  on  the application.

[6]      Mr Yarrow’s evidence, not disputed by Mr Henry, is that he retained Mr

Henry as his counsel in a shareholding dispute some 6 or 7 years before the present proceeding was issued.  Mr Yarrow describes a close working relationship with Mr

1      Yarrow v Pettigrew [2012] NZHC 509.

Henry and asserts that Mr Henry received information about his “situation, personality and approach to litigation” during that time.

[7]      Mr Yarrow has expressed some concern about the possibility that he will be cross-examined  by  Mr  Henry.     He  has  referred  in  particular  to  Mr  Henry’s knowledge of his “weaknesses, fears and likely reactions”.  In short, Mr Yarrow is concerned  that  Mr  Henry’s  knowledge  of  his  personality  traits  puts  him  in  an unfairly advantageous position to cross-examine him, on behalf of another party.

[8]      Mr Henry accepts that over a period of time he has undertaken instructions on behalf of Mr Yarrow but, more particularly,  on behalf of  companies  within the Yarrow group.  It does appear, however, that Mr Henry has been involved in advising Mr Yarrow on a number of issues, particularly relating to the settlement of an intra- family dispute over shareholding.

[9]      There were also misrepresentation proceedings issued, based on an alleged failure to disclose the profit achieved in relation to Australian companies in the group, when Mr Yarrow acquired shares.   Mr Henry says he received instructions from Mr Pettigrew, Mr Finnigan and Mr Gillespie in relation to those matters, even though the proceeding was in Mr Yarrow’s name.  He accepts that he met Mr Yarrow on occasions to update him on progress.  Mr Henry accepts that Mr Yarrow trusted him to look after his interests, as well as those of the company, throughout that dispute.

[10]     Mr Henry has specifically responded to the fears expressed by Mr Yarrow in relation  to  potential  cross-examination.    In  doing  so,  he  has  referred  to  others involved in the Yarrow group from whom he says that he obtained most of his instructions in relation to earlier litigation.  They are Mr Pettigrew, Mr Gillespie and Mr Finnigan.   Mr Henry’s position is that those three men have an intimate knowledge of Mr Yarrow and his personality that goes well beyond his.

[11]     Mr Henry has also proffered some thoughts about the way in which Mr Yarrow discusses matters arising out of the provision of legal advice with others.  He does so in the context of his position that no confidential relationship arose.

[12]     Mr Henry does not believe that he has any knowledge of Mr Yarrow that goes beyond what a competent barrister could work out from the collective knowledge of Mr Pettigrew, Mr Gillespie and Mr Finnigan.  A barrister would have access to all of those men in preparing cross-examination.

[13]     In summary, the professional relationship between Mr Yarrow and Mr Henry lasted some 6 to 7 years.  It involved advice given both to Mr Yarrow and companies within the Yarrow group. There was a relatively close business association.  Some of the advice given to Mr Yarrow was given in circumstances of vulnerability and stress.  Mr Henry was able to observe those circumstances and see how Mr Yarrow reacted to them.

[14]     It is always helpful for competent counsel to have a good knowledge of the person whom he or she may be required to cross-examine.  That assists both in the preparation of and the tactical approach to cross-examination.

The Associate Judge’s decision

[15]    The Associate Judge made factual findings in relation to Mr Yarrow’s relationship with Mr Henry.   He then went on to express his view that the circumstances required Mr Henry to be disqualified from acting for Mr Pettigrew and Duncan Dovico.  He said:2

[36] Mr Henry’s contact with Mr Yarrow went beyond that which would be undertaken by a barrister accepting instructions through an instructing solicitor. I mean no criticism of Mr Henry’s actions in prior cases for Mr Yarrow.  Obviously,  he  was  able  to  obtain  successful  outcomes  for  Mr Yarrow. That, however, is not the issue.

...

[40] Mr Henry undoubtedly would have obtained considerable information concerning  Mr Yarrow’s  financial  position,  the  financial  position  of  his company, its relationship with trusts and what could be expected by way of financial assistance, particularly from trusts. The extent to which that might have provided assistance to complete the transaction that is at the centre of the issue in this proceeding might well be relevant. Mr Henry confirms knowledge of bank guarantees given and the effect on Mr Yarrow. I would expect all of that background to be helpful when one comes to analyse the

2      Ibid, at paras [36], [40] and [41].

steps that were taken to secure finance for the transaction that is at the centre of  this  proceeding.  It  would  also  indicate  what  particular  difficulty  Mr Yarrow was facing at the time the transaction was sought to be completed. Some of that information would, of course, be confidential to Mr Yarrow.

[41] When I look at the facts in the round I reach the conclusion that Mr Henry, for a substantial period of time and a number of cases and events that in some instances did not reach the stage of litigation, has simply come too close to Mr Yarrow, his companies, and Mr Yarrow’s business affairs for the court to be satisfied that the integrity of the judicial process would be maintained by him acting against Mr Yarrow in this case.

[16]     Judge Faire approached the application on the basis that the Court had an inherent jurisdiction to restrain a barrister from acting where the interests of justice required that to be done.  He saw the rationale for the Court’s intervention as being “to ensure that justice is done, and seen to be done, ... [as opposed to] relying on a rule that treats knowledge of a client (as distinct from knowledge of his affairs) gained through a professional association as confidential information”.3

[17]     In making those observations, the Judge was mindful of the general right of a party to be represented by a solicitor or counsel of his or her choice,4 the absence of any continuing duty of loyalty owed by a barrister to a  party once the retainer between instructing solicitor and barrister ends5  and the absence of any “absolute and independent right” for a barrister to determine whether he or she should be entitled to act in any proceeding.6

Analysis

(a)      Review principles

[18]     The application for review is brought under s 26P(1) of the Judicature Act

1908 and r 2.3 of the High Court Rules.   Both counsel urged me to approach the application in a manner akin to that of an appeal by way of rehearing.  That involves

3      Ibid, at para [38], citing Black v Taylor [1993] 3 NZLR 403 (CA) in support.

4      Ibid, at para [39], citing Equiticorp Holdings Ltd v Hawkins [1993] 2 NZLR 737 (HC) at 739.

5      Ibid, at para [35], citing BOC New Zealand Ltd v Trans-Tasman Properties Ltd (1996) 10 PRNZ

199 (CA).

6      Ibid, at para [37], citing Black v Taylor [1993] 3 NZLR 403 (CA).

application  of  the  principles  set  out  in  Austin  Nichols  and  Co  Inc  v  Stichting

Lodestar.7

[19]     That  approach  has  in  fact  been  taken  previously.    I  refer  to  Stevens J’s decision in Burmeister v O’Brien.8    I proceed to deal with the application on that basis.

(b)      Counsel disqualification principles

[20]     I consider that the controlling authority in this case is Black v Taylor.9   In that case the Court of Appeal held that this Court had an inherent jurisdiction to control those who may represent parties to argue cases before the Courts.  The purpose of the control is to protect both justice and the appearance of justice, as opposed to imposing any form of punishment for alleged misconduct.   The issue is to be addressed by reference to factors that go beyond the prospect of misuse of confidential information.

[21]     The principal judgment in Black v Taylor was delivered by Richardson J. Although  Cooke P  and  McKay J  delivered  separate  judgments,  there  was  no disagreement with what Richardson J said.

[22]     Richardson J10  observed that knowledge of personalities and relationships, (though not confidential information in a strict sense), was derived from a professional relationship.   It was not unreasonable for a family member to feel “chagrin and concern” to find a lawyer who had built up knowledge of that kind to act for another party when able to use the knowledge, either consciously or subconsciously, for the new client’s benefit.  In relation to the inherent jurisdiction of

the Court, Richardson J added:11

The High Court has an inherent jurisdiction to control its own processes except as limited by statute. As an incident of that inherent jurisdiction it determines  which  persons  should  be  permitted  to  appear  before  it  as

7      Austin Nichols and Co Inc v Stichting Lodestar [2008] 2 NZLR 141 (SC).

8      Burmeister v O’Brien [2008] 3 NZLR 842, at para [29].

9      Black v Taylor [1993] 3 NZLR 403 (CA).

10     Ibid, at 408.

11     Ibid, at 408-409.

advocates. In determining what categories of person may appear it does so in accordance with established usage and with what is required in the public interest for the efficient and effective administration of justice (3(1) Halsbury's Laws of England (4th ed) para 396).

Another aspect of the inherent jurisdiction is the control of a particular proceeding in the Court. There the Court's concern is with the administration of justice in a particular case and in the generality of cases and with the associated basic need to preserve confidence in the judicial system. The right to a fair hearing in the Courts is an elementary but fundamental principle of British justice. It reflects the historical insistence of the common law that disputes be settled in a fair, open and even-handed way. It has been a mainspring of the development of administrative law over the past 40 years. Its  fundamental importance  has been  emphasised in a  number  of recent decisions  of this  Court, including  Minister of  Foreign Affairs  v  Benipal [1984] 1 NZLR 758; EH Cochrane Ltd v Ministry of Transport [1987] 1

NZLR 146 and R v Hall [1987] 1 NZLR 616.

An associated consideration is the fundamental concern that justice should not only be done but should manifestly and undoubtedly be seen to be done (R v Sussex Justices, ex parte McCarthy [1924] 1 KB 256, 259 per Lord Hewart CJ; see also R v Racz [1961] NZLR 227 and R v Burney [1989] 1

NZLR 732).

The integrity of our system of justice depends on its meeting those standards. The assessment of the appearance of justice turns on how the conduct in question - here Mr Gazley's wish to be able to act as a counsel for the defendants against MA Taylor - would appear to those reasonable members of the community knowing of that background.

In making that assessment the Court will also give due weight to the public interest that a litigant should not be deprived of his or her choice of counsel without good cause. The right to the choice of one's counsel is an important value. But it is not an absolute. That is recognised in criminal legal aid where the assignment of counsel is made by the Registrar and is not a matter of client choice (Legal Services Act 1991, s 17). And as a matter of practice the Court limits client choice in various respects. By way of illustration it does so by restricting the number of counsel it will hear; by expecting that counsel who have made an affidavit or a report before an appeal Court on factual matters of some significance will not appear to argue the case (R v Lui [1989] 1 NZLR 496); and by indicating that a practitioner should not appear as counsel for a party when his partner's conduct is a fact relative to an issue before the Court (Barrott v Barrott [1964] NZLR 988).

[23]     Counsel have referred me to other leading decisions on questions of this type. They may, however in my view, be distinguished.

[24]     Russell McVeagh McKenzie Bartleet & Co v Tower Corporation12 was a case involving alleged conflicts of interest by a firm of solicitors acting for potential

bidders for accompany   for which it had acted previously.   The issue turned on whether confidential information was held by the firm and, if so, whether that should require disqualification.

[25]     The Court of Appeal declined to disqualify.  The majority took account of the relatively small size of the New Zealand legal profession, particularly in areas where there was a limited availability of expert advice.13   Black v Taylor was distinguished specifically on the grounds that it involved a barrister acting in a family dispute in which he had previously acted as solicitor for family members generally. The factual situation and legal implications were said by Henry J (for himself, Richardson P and Gault J) to be far removed from the present case.14

[26]     In Prince Jefri Bolkiah v KPMG (A Firm)15 the House of Lords took the view that a firm of accountants should be disqualified from acting in an investigation for a party when that may be adverse to a former client from whom confidential information had been obtained.  Delivering the principal opinion, Lord Millett stated that he was not satisfied that KPMG had discharged the “heavy burden” of showing that there was no risk that information in the client’s possession which was confidential to them might not be used unwittingly or inadvertently against them.16

That  case  involved  accountants  and  did  not  bring  to  the  fore  the  type  of

considerations discussed in Black v Taylor.

[27]     In Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd,17 all five members of the Court of Appeal held unanimously that solicitors who had previously acted for a client in a mediation involving Carter Holt should be prohibited from acting for Sunnex in a mediation also involving Carter Holt Harvey Forests Ltd.   This was because there was an inherent incompatibility between lawyers participating in a confidential mediation for one client and acting for another in parallel litigation

against the same defendant.18    That too is different from the type of situation that

arises in this case.

13     Ibid, at 655.

14     Ibid, at 649.

15     Prince Jefri Bolkiah v KPMG (A Firm) [1999] 1 All ER 517 (HL).

16     Ibid, at 531.

17     Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343 (CA).

18     Ibid, at paras [23]–[31].

[28]     In broad terms, I agree with the conclusion reached by the Associate Judge. However, my approach is more nuanced and focuses on the ability of Mr Henry to prepare for and to conduct cross-examination of Mr Yarrow at trial.

[29]     In my view, the real difficulty in this case is that Mr Henry has knowledge of Mr Yarrow which, consciously or subconsciously, might assist him in conducting a critical cross-examination on the central disputed question of authority.   Referring back to Richardson P’s comments in Black v Taylor,19 the Court’s concern is with the administration  of  justice  and  the  associated  need  to  preserve  confidence  in  the judicial system.   The right to a fair hearing is elementary and fundamental.   It reflects the historical insistence that disputes be settled in a fair, open and even handed way.  There is also the fundamental concern that justice should not only be done but should manifestly and undoubtedly be seen to be done.  The integrity of the

justice system depends on meeting those standards.

[30]     In this case, as in Black v Taylor, it is my view that reasonable members of the  community,  knowing  of  the  background,  would  consider  that  information gleaned by Mr Henry from his association with Mr Yarrow over a period of some 6 to 7 years in the circumstances described could likely give rise to the misuse of information or impressions from that relationship, either consciously or subconsciously, when Mr Yarrow was cross-examined.

[31]     In reaching that view, I give appropriate weight to the public interest that a litigant should not be deprived of his or her choice of counsel without good cause. There is good cause in this case, for the reasons I have given.

[32]     I emphasise that nothing said in this judgment criticises Mr Henry.   The position he took was understandable.  However, the circumstances have led me to the view that it is inappropriate for him to continue to act.  I agree with the Associate Judge that he must be disqualified from doing so.

[33]     A second application before the Court relates to the transfer of the proceeding to Auckland.  All parties are resident in Auckland (except Mr Pettigrew, who resides in Sydney).  Counsel are also located in that city.

[34]     By consent, I make an order transferring this proceeding to the Auckland Registry of this Court.  The Registrar in Auckland is directed to set the proceeding down for a case management conference before an Associate Judge on the first available date, after consultation with counsel.

Costs

[35]     Having heard from counsel I consider that costs should be awarded in favour of Mr Yarrow on the review application.

[36]     I order costs on a 2B basis together with reasonable disbursements.  Those disbursements shall include the reasonable travelling and accommodation expenses for counsel for this hearing.

Result

[37]     The application for review is dismissed, with costs.20

[38]     The  application  to  transfer  the  proceeding  to  the  Auckland  Registry  is granted.

P R Heath J